Chevron (TAPL) Pty Ltd v Chevron Australia Pty Ltd, in the matter of Chevron

Federal Court of Australia|2023-10-05|Before: Derrington J

Solicitor for the Plaintiff: Mr D Jardine of HopgoodGanim Lawyers

ORDERS QUD 352 of 2023 IN THE MATTER OF MITHRIL RESOURCES LTD ACN 099 883 922 MITHRIL RESOURCES LTD ACN 099 883 922 Plaintiff

order made by: DERRINGTON J DATE OF ORDER: 6 September 2023

Introduction 1 The plaintiff in this matter, Mithril Resources Ltd (Mithril), is a precious metals exploration company presently focused on discoveries, acquisitions and the production of gold and silver in Mexico. Its key project is presently the "Copalquin Project" in Durango State, though it also maintains a portfolio of several tenements in Western Australia. It seeks orders pursuant to ss 411(1) and 1319 of the Corporations Act 2001 (Cth) (Corporations Act) to facilitate its eventual entry into a scheme of arrangement by which all of its issued ordinary shares will be acquired by Newrange Gold Corp (Newrange) and a scheme of arrangement by which certain categories of its unlisted options will be cancelled. The two schemes may be referred to as the "Share Scheme" and the "Option Scheme", respectively. 2 Newrange is an exploration company listed on the TSX Venture Exchange. It has a focus on two prospective gold projects in the Red Lake Mining Division of Northwestern Ontario, Canada. As part of the proposed Share Scheme, Newrange is to provide consideration to the shareholders of Mithril by issuing to them shares in Newrange. In a similar way, as part of the proposed Option Scheme, it is to provide consideration to the optionholders of Mithril by issuing to them warrants exercisable at certain specified prices. 3 The first hearing in relation to the Schemes was held on 6 September 2023. At the conclusion of that hearing, the orders accompanying these reasons were made. It should be acknowledged that those orders were proffered to the Court in advance of the hearing by the plaintiff's solicitors, who were acutely aware of the recent authorities in relation to schemes of arrangement. 4 It also bears mentioning at the outset that I have been assisted in these reasons by the learned analysis of Colvin J in DDH1 Limited, In the matter of DDH1 Limited [2023] FCA 982 (DDH1), which was delivered on 16 August 2023. At paragraphs [4] - [14] of his Honour's judgment, he identifies the important role that is to be played by the Court in the approval process for schemes of arrangement and the procedure that ought to be followed before such approval is given. In particular, it is appropriate to recognise his Honour's agreement with certain observations of Jackman J in Re Vita Group Ltd (2023) 165 ACSR 576 (Vita Group), at 581 - 582 [18], regarding the proper approach to putting before the Court any relevant matters that might have arisen in correspondence between the plaintiff and the Australian Securities and Investments Commission (ASIC) in relation to the scheme. I would adopt a similar position.

Principles relevant to the first hearing in relation to a scheme of arrangement 5 Part 5.1 of the Corporations Act sets out the procedure by which an arrangement between a company and its creditors or members can be made binding. That procedure has been said to involve three main steps, the first of which is the making of an application to the Court for an order that the company convene a meeting of its creditors or members: see Re CSR Ltd (2010) 183 FCR 358, 362 [7]; Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited [2015] FCA 341 [8] (Amcom); Re DuluxGroup Ltd (2019) 136 ACSR 546, 549 [14] (DuluxGroup). 6 Section 411(1) of the Corporations Act confers on the Court a discretion to order that such a meeting be convened. 7 A number of preconditions to the exercise of that discretion arise from the text of s 411, and various lists of these preconditions can be found in the authorities: see, eg, Amcor Limited, in the matter of Amcor Limited [2019] FCA 346 [45] (Amcor); Verdant Minerals Ltd, in the matter of Verdant Minerals Ltd [2019] FCA 556 [25]; DuluxGroup at 549 - 550 [15]; DDH1 [15]; Chesser Resources Limited, in the matter of Chesser Resources Limited [2023] FCA 1021 [15]. Although the lists have not always been identical, it is uncontroversial that: (a) the proposed scheme must be an "arrangement"; (b) the proposed scheme must be in respect of a "Part 5.1 body"; (c) the proposed scheme must be between the Part 5.1 body and its creditors or members; (d) an application for an order pursuant to s 411(1) must be made to the Court in a summary way by the Part 5.1 body or any creditor or member; (e) 14 days' notice of the Court hearing at which the order is sought, or such lesser period as ASIC or the Court permits, must be given to ASIC; and (f) the Court must be satisfied that ASIC has had a reasonable opportunity: (i) to examine the terms of the proposed scheme to which the application relates and a draft explanatory statement relating to the proposed scheme; and (ii) to make submissions to the Court in relation to the proposed scheme and the draft explanatory statement. 8 The authorities also indicate that the Court must be satisfied that: (a) the proposed scheme is bona fide and properly proposed; (b) the requirements in ss 411(3) and 412 of the Corporations Act, and reg 5.1.01 and Sch 8 to the Corporations Regulations 2001 (Cth) (Regulations), regarding the information that is to be sent to creditors or members about the scheme have been met, such that the explanatory statement relating to the proposed scheme will provide sufficient disclosure to creditors or members; (c) all other procedural requirements have been met, including those in the Federal Court (Corporations) Rules 2000 (Cth) (Rules); and (d) the proposed scheme is "fit for consideration" at the meeting, in the sense that there is no apparent reason why the scheme should not, in due course, receive the Court's approval if the necessary majority of members' or creditors' votes is achieved. See generally Amcom [12]; EcoBiotics Limited, in the matter of EcoBiotics Limited [2017] FCA 643 [20] - [21]; Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [2018] WASC 308 [60] - [63] (Wesfarmers); Chevron (TAPL) Pty Ltd v Chevron Australia Pty Ltd, in the matter of Chevron (TAPL) Pty Ltd [2022] FCA 220 [17]. 9 The standard of review at the first hearing in relation to a scheme of arrangement has been the subject of judicial comment on a great number of occasions. Any further contribution to the corpus of authorities on this point would be unwarranted. It suffices to repeat the summary observations of Banks-Smith J in Essential Metals Limited, in the matter of Essential Metals Limited [2023] FCA 240 (Essential Metals) at paragraph [24], as follows: In summary, the standard of review is whether the proposed scheme is not inappropriate and is one that sensible business people might consider is of benefit to its members. It is not necessary for the Court to descend into the commercial merits of the proposed scheme. If the proposed arrangement is one that seems fit for consideration by a meeting of members and is a commercial proposition likely to gain the Court's approval if passed by the necessary majority, then leave should be given to convene the meeting. 10 Parts of that passage were quoted with apparent approval by Colvin J in DDH1 at paragraph [23], where his Honour also endorsed the following statement of Beach J in Amcor at paragraph [47]: My function on an application to order the convening of a meeting is supervisory. At this stage I should generally confine myself to ensuring that certain procedural and substantive requirements have been met including dealing with adequate disclosure, with limited consideration of issues of fairness. But having said that, it is appropriate to consider the merits or fairness of a proposed scheme at the convening hearing if the issue is such as would unquestionably lead to a refusal to approve a proposed scheme at the approval hearing, that is, the proposed scheme appears now to be on its face "so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further" (Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at [44] per French J). 11 Finally, it ought to be noted that, in this Court, there has recently been an increased attentiveness to, and criticism of, the supererogatory practices that over time seem to have become part of the "usual approach" to court hearings for schemes of arrangement. In Vita Group, Jackman J drew particular attention, at 580 - 581 [14] - [16], to the inconsistency between these practices and the objective expressed in s 37M of the Federal Court of Australia Act 1976 (Cth) that disputes be resolved as quickly, inexpensively and efficiently as possible. The approach that his Honour promoted instead was one requiring the plaintiff proactively to bring to the Court's attention, particularly in written and oral submissions, the specific features of the proposed scheme in respect of which issues had arisen or were anticipated to arise. The adoption of this approach was commended in his Honour's later decision in Blackmores Limited, in the matter of Blackmores Limited [2023] FCA 624 at paragraph [14]. 12 Not every aspect of what was said in Vita Group has subsequently been endorsed: see Tesserent Limited, in the matter of Tesserent Limited (First Scheme Hearing) [2023] FCA 969 [21] - [22]. However, the streamlined approach to schemes of arrangement that it explicates and supports is, in general, to be encouraged. Consistent with this approach are the remarks of Colvin J in DDH1 at paragraphs [25] - [28], which I gratefully adopt and repeat: 25 … [I]t must be observed that the Court now has regard to a body of regulatory practice and experience as well as established jurisprudence in the exercise of its discretion. With the benefit of a considerable history of deliberation by ASIC and the courts exercising the supervisory jurisdiction invested by s 411 of the Corporations Act, schemes with various characteristics have come to be identified as schemes in respect of which the discretion will be favourably exercised. The Court exercises its discretion in that context. Accordingly, it is not necessary to reinvent the wheel in respect of each and every application. For that reason, it is appropriate, for applications for an order that a meeting be convened to consider a scheme, to focus upon those aspects which are out of the ordinary or which have characteristics that the Court regularly subjects to close scrutiny. 26 In discharging these aspects of the discretionary task, the Court is aided considerably by an understanding of what has emerged from the scrutiny of the scheme and the proposed explanatory material by ASIC and the discharge by counsel of their duties. Matters to be addressed by submissions 27 It follows that at the hearing of an application for an order that a meeting be convened to consider and approve a scheme, usually the Court may be expected to be presented with: (1) a concise description of the nature of the scheme that exposes its commercial rationale, how it will be carried into effect and the extent of any performance risk; (2) evidence and submissions to the effect that the Conditions are met; (3) submissions as to any director benefits and consequences for director recommendations; (4) submissions as to any significant matters which have arisen in the course of dealings with ASIC; (5) submissions as to any features of the scheme (or the form of the explanatory information) that counsel considers ought be drawn to the attention of the court in the discharge of counsel's duty which should include potentially contentious aspects of the scheme (or form of the explanatory information) or matters that raise novel issues not previously considered by the Court; (6) submissions to the effect that the scheme, if approved, will be able to be carried into effect without exposing members (or creditors) to unreasonable performance risk, including as to any liability imposed by the scheme upon members (or creditors) such as warranties; and (7) proposed arrangements for dispatch of materials and convening the meeting, including identification of the proposed chair for the meeting and any conflict of interest issues. 28 The Court, informed by an explanation of the nature of the scheme, must then determine that the Conditions are met, that the scheme is able to be carried into effect, evaluate the matters raised by the submissions and exercise the discretion having regard to long standing authority as to the nature of that discretion. The Court will also address the proposed arrangements for the meeting itself. 13 It follows, presently, that many of the matters that have been recognised in prior authorities as bearing on the exercise of the discretion in s 411(1) of the Corporations Act need only be dealt with very briefly. That is particularly so since transactions involving both share schemes and option schemes together are not unusual, and have been considered by this Court on a number of occasions: see the cases cited in Security Matters Limited, in the matter of Security Matters Limited [2023] FCA 19 [24]. There is, accordingly, no inherent reason to regard this case as warranting any elevated level of scrutiny. Having regard to Mithril's submissions at this first hearing, it is appropriate for more attention to be directed to certain of the points listed at paragraph [27] of DDH1, which go to the ultimate question of whether the proposed Schemes are "fit for consideration" at the intended meetings of shareholders and optionholders.

Preconditions in section 411 of the Corporations Act to the exercise of the discretion 14 It is clear, on the evidence before the Court, that all of the preconditions to the exercise of the discretion to order a meeting that arise from s 411 of the Corporations Act are satisfied. 15 In particular, the evidence shows that ASIC has been given the necessary notice of the present hearing, in accordance with s 411(2) of the Corporations Act. By a letter to the solicitors acting for Mithril dated 5 September 2023, ASIC indicated that it had received 14 days' notice of the hearing of Mithril's application under s 411(1). It also stated that it was of the view that it had been afforded a reasonable opportunity to examine the terms of the Share Scheme and Option Scheme, and the draft explanatory statement, and to make submissions to the Court in relation to those matters. Finally, it noted that it did not intend to appear at the first hearing to make submissions or to intervene to oppose the Schemes.

Other matters relevant to the exercise of the discretion 16 There is no reason to suspect that the proposed schemes in this case are anything other than bona fide and properly proposed. Nor is there any real concern as to Mithril's fulfilment of the applicable procedural requirements, including under the Rules. 17 The two remaining matters to be addressed in more detail are, first, the sufficiency of the disclosure that is to be given by way of the proposed explanatory statement and, secondly, the question as to whether the Schemes are "fit for consideration". These points may be addressed in turn.

Sufficiency of the disclosure 18 Section 412(1) of the Corporations Act provides as follows: (1) Where a meeting is convened under section 411, the body must: (a) with every notice convening the meeting that is sent to a creditor or member, send a statement (in this section called the explanatory statement): (i) explaining the effect of the compromise or arrangement and, in particular, stating any material interests of the directors, whether as directors, as members or creditors of the body or otherwise, and the effect on those interests of the compromise or arrangement in so far as that effect is different from the effect on the like interests of other persons; and (ii) setting out such information as is prescribed and any other information that is material to the making of a decision by a creditor or member whether or not to agree to the compromise or arrangement, being information that is within the knowledge of the directors and has not previously been disclosed to the creditors or members; and (b) in every notice convening the meeting that is given by advertisement or that is published in the prescribed manner, include either a copy of the explanatory statement or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of the explanatory statement. 19 As noted above, disclosure requirements also arise from the Regulations, though none of those requirements is in issue in the present case. In much the same way, no issues in relation to disclosure stem from ASIC Regulatory Guide 60, which was properly addressed in Mithril's written submissions for the purposes of this first hearing. The critical concern is therefore the adequacy of the explanatory statement, which has been described in this case as the "Scheme Booklet". 20 In assessing the adequacy of an explanatory statement, the Court is concerned with ensuring that full disclosure occurs in order for members and creditors to be properly informed in the course of their consideration of the scheme: DDH1 [18], quoting Wesfarmers [54]. In this respect, the Court will take into account, amongst other things, whether all of the main facts in relation to the proposed scheme have been exposed, such that members and creditors can exercise their rights on an informed basis. That analysis is one of fact and degree, depending on the unique circumstances of the scheme when considered in a practical and commercial manner. Necessarily, there must be some balance struck so that the information to be provided is sufficient without being of such an overwhelming quantity as to be unintelligible. As Thomas J said in Re Crusader Ltd [1996] 1 Qd R 117 at 125 - 126, the litmus test is whether a "fair picture" is being presented, with a focus on whether there is any unbalanced presentation, intentional obfuscation, or employment of unfair sales techniques. 21 In this case, the Scheme Booklet contains, or otherwise addresses, each of the prescribed matters. Mithril's solicitors have provided to the Court a checklist identifying each statutory requirement and where in the explanatory statement that requirement has been complied with. A perusal of that checklist, together with the broader evidence on which Mithril relies, reveals the checklist to be accurate. 22 In relation to some of the statutory requirements, Mithril has sought dispensation from ASIC, given the particular circumstances of this case. It has proposed to take other steps that are, in substance, as effective as strict compliance with those requirements would be in ensuring sufficient disclosure. ASIC has acceded to Mithril's requests for relief, and the basis upon which it has done so appears to be reasonable. 23 The material provided in the Scheme Booklet, together with the other information available to shareholders and optionholders, appears to give a clear and comprehensive summary of the essential matters to be considered in relation to the Schemes. There is no trace of any misleading or deceptive content in the Scheme Booklet, nor can it be regarded as unintelligible in any respects.

Are the Schemes fit for consideration? 24 As foreshadowed above, it is appropriate at this point to turn to address certain of the matters listed by Colvin J in DDH1 at paragraph [27].

The nature of the Share Scheme and the Option Scheme 25 The Share Scheme in this case is, in effect, what is known as a "reverse takeover". Newrange will acquire all of the issued ordinary shares in Mithril, but Mithril's shareholders will acquire the majority shareholding in Newrange. The Option Scheme, more straightforwardly, contemplates that all unlisted options exercisable at $0.015 on or before 26 April 2024 (Class A Options) and all unlisted options exercisable at $0.007 on or before 9 December 2025 (Class B Options) will be cancelled. 26 The consideration payable by Newrange to Mithril's shareholders under the Share Scheme is to be 18.08 Newrange common shares for every 1,000 of their Mithril shares. In exchange for the cancellation of the Class A Options or Class B Options, Mithril's optionholders will receive from Newrange 18.08 warrants exercisable at CA$0.77 for every 1,000 Class A Options and 18.08 warrants exercisable at CA$0.36 for every 1,000 Class B Options. 27 The consideration flowing from Newrange implies an equity value of Mithril of approximately $11.8 million on an undiluted basis. 28 The value of the consideration to be paid for the Mithril shares pursuant to the Share Scheme equates to $0.035 per share. That is a 58.87% premium on the trading price of Mithril shares, based on a volume weighted average price over the 30 ASX trading days prior to the announcement of the execution of the Scheme Implementation Deed (SID) between Mithril and Newrange on 26 May 2023. 29 An independent expert's report (IER) dated 25 August 2023 has also been provided to the Court, which concludes that, in the absence of a superior proposal: (a) the Share Scheme is not fair but is reasonable to shareholders and is therefore in the best interests of shareholders; and (b) the Option Scheme is not fair but is reasonable to optionholders and is therefore in the best interests of optionholders. 30 Neither the Share Scheme nor the Option Scheme differentiates between any of the members of the class that it affects. All Mithril shareholders have the same rights in the Share Scheme: that is, the right to receive as consideration the aforementioned number of shares in Newrange. Similarly, all optionholders have the same rights in the Option Scheme, being the right to receive the specified number of warrants as consideration for the cancellation of their options. 31 One minor qualification to the above is the existence of certain unlisted "ESOP" (Employee Stock Ownership Plan) Options and unlisted "Performance Rights" currently held by some of the directors of Mithril. Whilst the holders of those securities are not to be treated in precisely the same manner as the shareholders and optionholders, that does not have the consequence of creating a separate or additional class. As to the ESOP Options, cl 1(k) of Schedule 1 (together with cl 2.5) of the SID provides that, before the "Delivery Time" (as that term is defined in the SID), all of the ESOP Options will have either lapsed before the Record Date (being the second business day following the date on which the scheme becomes "Effective"), been cancelled before the Record Date, or vested and been exercised before the Record Date. The same clauses of the SIP also provide that all of the Performance Rights will have either lapsed before the Record Date, been cancelled before the Record Date, or vested and been exercised before the Record Date. 32 The existence of the ESOP Options and the Performance Rights, and the manner in which they will be dealt with under the proposed Schemes, is disclosed in the Scheme Booklet. In the circumstances, their effect on the Schemes is relatively inconsequential. There is no reason to consider them as giving rise to any separate class of members or creditors. 33 It is worth observing that the material indicates that the directors of Mithril will be treated, in their capacity as shareholders and optionholders, in the same manner as other ordinary shareholders and optionholders. There is no evidence before the Court that the directors will obtain any undue benefits from the Schemes in the sense contemplated by the authorities, or that they hold such a significant portion of the securities as to warrant a heightened degree of scrutiny. They should not be considered a separate class of members or creditors. 34 In this case, ultimately, the shareholders of Mithril are treated differently to the optionholders. That is unremarkable, given that the optionholders are essentially creditors and, in that respect, the proposed Option Scheme is to be undertaken as a creditors scheme: Re Compania de Electricidad de la Provincia de Buenos Aires Ltd [1980] Ch 146, 182 - 183. Nevertheless, in accordance with RG60.63 of ASIC Regulatory Guide 60, whilst optionholders are generally to be treated as contingent creditors in a scheme, ASIC considers that the information that optionholders require when considering whether or not to approve a scheme is much closer to the information required by members rather than creditors. It appears that Mithril will be proceeding on precisely this basis in the present case, with essentially the same level of information to be available to both shareholders and optionholders.

Directors' recommendations 35 As explained above, Mithril's directors do not constitute a separate class of securityholders for the purposes of the Share Scheme and the Option Scheme. They stand to obtain no benefit from the Schemes beyond that which will be obtained by other shareholders and optionholders, and full and prominent disclosure of their security holding is to be provided in the Scheme Booklet: cf Asaleo Care Limited, in the matter of Asaleo Care Limited [2021] FCA 406 [70] - [71]; ThinkSmart Limited, in the matter of ThinkSmart Limited [2022] FCA 1314 [51] - [53]. 36 The directors have, against this background, unanimously recommended that shareholders and optionholders vote in favour of the Schemes, in the absence of a superior proposal and subject to the independent expert continuing to conclude that the Schemes are in their best interests. There is nothing that calls this recommendation into question.

Particular features of the Schemes and the terms of disclosure 37 Mithril's written submissions for the purposes of the first hearing helpfully made reference to a number of specific matters about which the Court might have some concern in exercising the discretion to order that a meeting be convened under s 411(1). It is appropriate to address several of these in turn.

The conclusion drawn in the IER 38 The Court was referred to the conclusion drawn by the independent expert in the IER, as set out above, that: (a) in the absence of a superior offer, the Share Scheme is not fair but is reasonable and is, therefore, in the best interests of shareholders; and (b) in the absence of a superior offer, the Option Scheme is not fair but is reasonable and is, therefore, in the best interests of optionholders. 39 These conclusions appear, at first blush, to be internally inconsistent. However, they can better be understood once the concepts of "fairness" and "reasonableness" are explained in more detail. 40 In assessing "fairness", the independent expert valued a share or option in Mithril prior to the implementation of the Schemes, and compared that value to the value of the consideration offered by Newrange for each Mithril share or option - the consideration being taken to represent the value of the equivalent ownership interest per Mithril share or option in the merged group. This comparison allowed the expert to ascertain whether a shareholder or optionholder would be relatively better or worse off in the event that the Schemes were approved. The ultimate conclusion drawn from the exercise was that the value of a Mithril share or option after the implementation of the Schemes, as derived from the consideration paid by Newrange, would be less than the value of the share or option prior to the implementation of the Schemes. That leads to the conclusion that the proposed Schemes are not fair to the shareholders or optionholders. 41 However, a scheme might nevertheless be "reasonable" if there are sufficient grounds for shareholders or optionholders to accept it in the absence of a better offer. In this connection, the independent expert considered the future for Mithril if the Schemes were not approved and concluded that it would need to secure further funding to maintain its exploration activities. If the Schemes are approved, Mithril and its securityholders will be exposed to a more diversified asset portfolio and enhanced opportunities. The larger size of the merged group, and the expanded board of directors (comprising the existing directors of Mithril and of Newrange), may introduce a broader range of opportunities and skills. That merged group will form a substantially larger listed entity with greater pooled assets, giving rise to an increased ability to secure working capital. 42 Overall, the expert considered that, notwithstanding the issue of unfairness, the advantages of the Schemes outweigh their disadvantages. The net advantage is sufficient to compensate the shareholders and optionholders for the lower value that they will receive by way of consideration. Accordingly, in the absence of any superior offer, it has been concluded that the Schemes are reasonable and, as such, in the best interests of the shareholders and optionholders. All of this appears in the Scheme Booklet. There is no apparent reason to question the conclusions in the IER.

Exclusivity provisions 43 As is common in matters such as the present, Mithril and Newrange have agreed between themselves in the SID to periods of exclusivity in relation to the transaction. There is nothing unusual about the exclusivity provisions in the present case. The "Exclusivity Period" (as defined in the SID) and the coverage of the exclusivity provisions are clear, and have been announced publicly so that any rival bidder is able to identify when to make an approach or competing offer. The provisions are also to be disclosed in the Scheme Booklet. 44 Ultimately, exclusivity provisions of this kind are often commercially necessary in order to facilitate schemes of arrangement. The obligations imposed on Mithril and Newrange are orthodox, appropriately calibrated to the circumstances of this case, and properly disclosed. They do not raise any of the potential concerns identified in the prior case law: Re APN News & Media Ltd (2007) 62 ACSR 400, 406 [29] (APN), citing Re Arthur Yates & Co Ltd (2001) 36 ACSR 758, 759 - 760 [9].

Reimbursement of costs (break fee clause) 45 Mithril and Newrange have also included in the SID a "break fee" clause. Upon the occurrence of certain events set out in the SID, one party will pay to the other a "reimbursement payment" of $110,000. Again, this is to be disclosed in the Scheme Booklet. 46 Provisions of this kind are, like the exclusivity provisions mentioned above, commonly employed as an important commercial feature of a scheme of arrangement. It has been said that they should only prevent the making of an order to convene a meeting if the break fee is so large that it might influence voting during that meeting, or if some other unusual circumstance arises: APN at 408 - 409 [43], citing Re SFE Corporation Ltd (2006) 59 ACSR 82, 83 - 84 [6] - [7]; Rusina Mining NL, in the matter of Rusina Mining [2010] FCA 517 [51]; SRG Limited, in the matter of SRG Limited [2018] FCA 1092 [39]. 47 The break fee in this case does not present any such danger. The figure of $110,000 is relatively modest. Importantly, it is less than 1% of Mithril's total equity value, so as to fall below the threshold identified in the Australian Takeovers Panel Guidance Notice GN7, at paragraphs [9] - [10], which provides an appropriate yardstick to use in this matter. 48 In any event, there are several safeguards set up in the SID to minimise the potential for the break fee to have any coercive effect. There is nothing unusual about the arrangement.

Foreign holders 49 The Share Scheme provides that an "Ineligible Foreign Holder" will not receive consideration in the form of shares in Newrange. Instead, the Newrange shares that would otherwise have been issued to them will be issued on their behalf to a "Sale Agent" (as defined in cl 1.1 of the Share Scheme), and thereafter sold. The proceeds of the sale, less brokerage and other costs, taxes and charges, will then be paid to the relevant shareholders following implementation of the Share Scheme. 50 There is no equivalent arrangement under the Option Scheme, as there is no limitation on the issuing of Newrange warrants to foreign optionholders. 51 No concerns arise from these circumstances. It has been acknowledged in the authorities that special provision must commonly be made for foreign shareholders on account of certain restrictions in place in their countries of residence that make it impractical or unlawful for them to receive a new issue of shares: Re Rural Press Ltd (2007) 61 ACSR 373, 376 [20].

Deemed warranties and the no liability in good faith provision 52 Mithril has drawn attention to certain deemed warranties in the Share Scheme and Option Scheme, which are to be disclosed in the Scheme Booklet, along with a clause in the SID that provides that each of Mithril and Newrange will release its rights against directors and employees in relation to information provided to it, or in relation to its entry into the SID, to the extent that the director or employee has acted in good faith. Neither the deemed warranties nor the "no liability in good faith" provision is problematic: see APN at 412 [59] - [60]; Essential Metals [86].

Performance risk 53 The term "performance risk" refers to the risk that, after transferring their shares or cancelling their options, the shareholders and optionholders in a target company will be left with: (a) no scheme consideration; (b) no capacity to sue the acquirer or recover the shares or damages; and/or (c) delay in the provision of scheme consideration, with the only remedy being to sue on a deed poll. 54 As explained by Lindgren J in APN at 405 [23], the risk is that: … shareholders may be left in a position, once a scheme has become effective, where their shares have been transferred but where there is a delay in the provision of the scheme consideration and where their only remedy is to sue on the deed poll … 55 In the present case, the architects of the schemes have accounted for this potential issue in a manner consistent with modern practice: see Essential Metals [52]. Newrange is required under the Schemes to provide the total consideration as a precondition to it being transferred the shares and to the cancellation of the options. Newrange has executed documents, described as the "Share Scheme Deed Poll" and the "Option Scheme Deed Poll", that confirm its obligations in this respect. Those deeds poll are governed by the law of Queensland, and Newrange has submitted irrevocably to the non-exclusive jurisdiction of the Courts of that State. 56 It has been suggested in prior authorities that it should be confirmed to the Court in evidence that a deed poll has been executed properly in accordance with the foreign law of the place of incorporation of the acquiring company: Essential Metals [55], citing Staging Connections Group Limited, in the matter of Staging Connections Group Limited [2015] FCA 1012 [45]. There is accordingly evidence before the Court to demonstrate that the deeds poll were validly executed by two directors of Newrange, and subsequently approved by a resolution of the board of directors of the company, according to the laws of Canada. 57 Given the foregoing, the performance risk in the transaction is minimal.

Arrangements for shareholder communications 58 The manner in which communications are to be made to members and creditors is of particular importance to the exercise of the Court's discretion to approve the convening of a meeting: see, generally, Associated Advisory Practices Limited, in the matter of Associated Advisory Practices Limited (No 2) [2013] FCA 979 [8]; DDH1 [22]. Because the meeting is convened in accordance with an order of the Court, and the Court is to approve the explanatory statement in connection with that meeting, the Court-approved "message" is generally not to be interfered with by unilateral supplementation by the plaintiff company: Re Centro Retail Ltd (in its capacity as responsible entity of Centro Retail Trust) [2011] NSWSC 1321 [11]. For this reason, the Court may require the production of any scripts that are to be used by the company in contacting securityholders for various purposes: see Re ResApp Health Ltd [2022] NSWSC 1014 [15] - [17]; Essential Metals [88] - [101]. 59 Here, Mithril has disclosed to the Court the contents of a proposed "shareholder calling script", a description of a proposed link on its website and the contents of the covering letters and emails that will be sent with the Scheme Booklet. There is nothing in that material that raises any concerns. Importantly, Mithril does not intend to make any outbound calls to its shareholders or optionholders. The shareholder calling script is concerned only with the reception of inbound calls. 60 The material disclosed to the Court cannot reasonably be considered "supplementary" information of a substantive nature that departs or deviates from the Scheme Booklet: cf Essential Metals [100]. It is sourced from the Scheme Booklet itself. Nevertheless, given the sensitivity of this issue, Mithril has sought directions permitting it to communicate the material to its shareholders and optionholders. 61 Those directions ought properly to be given. The information contained within the proposed communications is in an appropriate format and conforms with the Scheme Booklet.

Physical meeting, electronic despatch of the Scheme Booklet and proxy form 62 Mithril intends to conduct physical meetings. It seeks orders pursuant to s 1319 of the Corporations Act for the despatch of the Scheme Booklet and associated materials: (a) under cover of an email, for shareholders and optionholders who have approved electronic communications; (b) in hard copy, for those who have elected in accordance with their statutory entitlements to receive hard copy communications; and (c) in all other cases, by a hard-copy letter with relevant forms, with links to the Scheme Booklet. 63 As Mithril acknowledges in its written submissions, the electronic despatch of Scheme Booklets, including notices of meetings and proxy forms, is now common. No issue arises in that respect. 64 As set out in conjunction with these reasons, the full set of orders proposed by Mithril for the delivery of information to shareholders and optionholders is comprehensive. Those orders should be made.

Exercise of discretion 65 For the foregoing reasons, it is appropriate to exercise the discretion conferred by s 411(1) of the Corporations Act to order that Mithril convene and hold a meeting of its shareholders in relation to the proposed Share Scheme and a meeting of its optionholders in relation to the proposed Option Scheme. 66 The detailed orders proposed by Mithril were appropriate in the circumstances of this matter. They generally resembled the orders made in other matters of a similar kind and could, for that reason, be regarded as largely uncontroversial. I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.

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